Toys R Us sees video game dollars flowing to toys this Christmas

I have been making the case that video games sales come at the expense of toy sales. Well, I found some support for my argument in two places. 

First, I spoke with an industry analyst who made this interesting point: It is possible to track a steady decline in the sales of traditional toys dating back to the release of the Sony Playstation in 2000, Microsoft Xbox in 2001 and Nintendo Game Cube also in 2001. He felt that these systems were so exciting that they generated an intense new cycle of interest in video games that moved out beyond the traditional user base. 

Second, it appears that Toys R Us is in agreement as well. Tim Conder, Wells Fargo Managing Director for Leisure Equity Research and an analyst who follows the toy industry attended a presentation of Toys R Us management on September 17, 2009. Here is what he had to say:

Video games [continue] to be negatively impacted by the product cycle; however, TRU’s game trade-in program is benefiting incremental sales of traditional toys. … TRU does not expect a material trade-down from present levels in upcoming Christmas toy sales. In fact they believe higher price point traditional toys could be substituted for last year’s video console purchases [emphasis mine].

So, I will continue to track video game and toy sales closely as we move through the holiday season. Based upon what Toys R Us has to say, you may want to as well.